Thursday, June 21, 2018

I tend to spot articles over time that I can tell will have some future relevance, but I can't always put my finger on it. A good example of why saving copies of such pieces is important is here -- I didn't know what to make of that oil price article in 2012, but I certainly did by the end of 2014.

Similarly, I am linking to an article today from March, that I had thought would be part of a more complicated piece. It's from Noah Smith, a former finance professor who blogs himself professionally for Bloomberg. The piece is interesting on its own merits because so many of us seem to think of a college as a place that educates the local population, and because, in true academic fashion, Noah points in a different direction:

"... ideas and technology leak out to surrounding businesses in myriad ways ... [a]cademics consult for local businesses. [Staff] start local businesses of their own. Companies ... hire smart people away from... campus jobs. [Colleges] provide forums for local entrepreneurs, inventors and academics to meet each other, exchange ideas and offer employment ... [h]igh-productivity technology businesses therefore tend to cluster ... in order to take advantage of the rich flow of ideas and skilled workers. That, in turn, draws smart educated people from other regions, boosting productivity and raising wages even for less-educated locals."

That the impact of an educational institution is, economically, in many respects due to the private-sector activity it influences in the surrounding economy, rather than the degreed individuals marching out the door in regular intervals, is I think a key to understanding the intuitive interest so many have in the fate and future of their local schools and colleges, beyond whether they or their children did, will, or do attend at any given time ...

Thursday, June 7, 2018

I blog from time to time on the trustworthiness of newssources, and in general in the United States, the Economist is often considered the most reliable when surveys of the public are conducted. Before the June 5, 2018 primary in California, they took a look at San Francisco's Mayor's race. Their article touched the twin problems of the cost of housing and of homelessness, and I recommend the piece (available online here).

It's disturbing reading. The author (The Economist eschews bylines) confronts the lived reality in terms that the reader can almost smell. But the striking sentence to me was "[t]o voters, though, the problem seems to be getting worse ... '[but t]here’s not more homelessness than before. It’s just a lot more visible,” says [Jeff] Kositsky [San Francisco's Director of Homelessness Services]."

We all struggle in the San Francisco Bay Area to understand how wealth disparities in the nine county area can rival those on display in what the article characterizes as "poor-world entrepôts." But that the situation has become clear to so many is not in dispute, and perhaps that is the silver lining -- for we must have awareness before we can take action together.

Tuesday, May 15, 2018

Just a brief note today, regarding reporters who are pointing to an economic and financial shift. Extraordinarily low interest rates have had a significant impact on asset prices in Sonoma Valley (as I blogged about here, here, and here). In 2015, Robert Shiller pointed out that in the San Francisco Bay Area, that most people expected annual home price increases over the next decade of 5%. However, more than a quarter of respondents thought prices would increase each year by 10% or more. Many of the second group leveraged (and profited impressively) as real property prices have continued to rise over the intervening 36 months.

Today, though, there is evidence that change is afoot, as the yield on "cash" (short term Treasuries) now exceeds the dividends on a broad range of stocks (the S&P 500). The Financial Times' graph, courtesy of John Authers, is on the right. I extended the graph back a bit (to 1933) just to get a longer perspective, via FRED and multpl. For about a thirty year period, dividends were generally always higher, until some point in June of 1963, when the rule flipped. Cash was king, more or less constantly, for the following ~2,335 weeks, until February of 2008. There are periods where these two measures briefly "invert" from the norm in both eras (e.g.1959 for dividends, 2002 for cash), but it's unusual.

What does it mean? Stanford economist Bob Hall (who continues as chairman of the academic panel that dates American business cycles) notes that, economic syncopation being what it is, “[t]he next recession will come out of the blue ... just like all of its predecessors.” However, the Economist has pointed out previously that this economic cycle is already running exceptionally long at ~105 months, and it is now more than a year past the average of the last three (the longest ever, March of 91-March 01, was 120 months). Meanwhile, valuations continue to be particularly rich (the Shiller PE is at 32.33, in excess of the '29 crash and only matched by the dot-com bubble). My sense is that the financial columnists pointing to this data are wondering how "out of the blue" a contraction could be at this point. Which is an interesting point to consider, when one reflects on the power of narratives in financial markets.

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